An example of how government can become an obstacle to economic recovery

I don’t imagine anyone would argue that it is supposed to be like this, however, this is reality in one city in one state and I’d guess that its true in most places to one degree or another. The place in question? San Francisco, where a woman wanted to open a simple ice cream shop.

Ms. Pries said it took two years to open the restaurant, due largely to the city’s morass of permits, procedures and approvals required to start a small business. While waiting for permission to operate, she still had to pay rent and other costs, going deeper into debt each passing month without knowing for sure if she would ever be allowed to open.

“It’s just a huge risk,” she said, noting that the financing came from family and friends, not a bank. “At several points you wonder if you should just walk away and take the loss.”

Ms. Pries said she had to endure months of runaround and pay a lawyer to determine whether her location (a former grocery, vacant for years) was eligible to become a restaurant. There were permit fees of $20,000; a demand that she create a detailed map of all existing area businesses (the city didn’t have one); and an $11,000 charge just to turn on the water.

Imagine how many potential business owners would have said “the hell with it” and, if possible, gone elsewhere or shelved the idea completely? Had that happened in this case, had the woman in question not had the patience of Job and enough money to weather the 2 years in question, 14 full and part-time workers wouldn’t be employed there.

That’s the problem with stories like this – its hard to get a handle on how many businesses have been discouraged by such a permitting and regulation regime, but you have to assume they are plenty.

It should not take two years for a government to say “okay” to a business. Nor should there be exorbitant fees associated with it.

Thankfully San Francisco has begun to recognize the enormity of its problem and attempt to do something about it. A little thing called “reality”, in the guise of the headquarters for Twitter, has finally begun to bring some government officials around:

“The city has had the reputation of being a difficult place, and a hostile place, to do business,” said Mark Farrell, the city supervisor who has the most private-sector experience (he still operates a venture capital firm). “We’re changing the dialogue.”

According to Mr. Farrell, a critical shift occurred last year when supervisors approved a tax incentive to keep the headquarters of Twitter, the social network, in the city after the company threatened to move.

But he admitted that such actions were relatively easy compared with reforming the city’s entrenched bureaucracy. “To change the inner workings of government is a longer proposition,” he said.

Christina Olague, a former Planning Commission president who was recently appointed city supervisor, said that planning codes governing businesses had ballooned over the years to become hundreds of pages long. “It’s so convoluted,” she said. “It’s so difficult for these businesses to move ahead.”

But the byzantine, time consuming and costly regulatory process, for the most part, still remains. Check out this animated video which illustrates how absurd it can be.

As we’ve said any number of times here, if government wants to play a role in the economy and the economic recovery, perhaps the best role it can play is, for the most part, to get the hell out of the way.

3 Responses to An example of how government can become an obstacle to economic recovery

Fascist economics HATES entrepreneurs because they are far too hard to control, there are too many of them, and they tend to be far too independent.

Because the people in charge of a fascist system prefer to deal with a few large, malleable players, resource allocation, law, and regulation will naturally TEND to favor large incumbent players.

Without being overtly designed to foster a fascist economic structure, many aspects of the government/business nexus have been known for hundreds of years to work in the direction of monopoly. They just grow that way unless actively pruned.

Bureaucratic organizations (especially governmental ones) TEND to be expansive, and to metastasize into areas far outside their original charter. They defend inefficiency, error, and even violations of law at enormous cost, rather than learn from them and move on, as most for-profit organizations are compelled to do.

Much in the way of codes and regulation is manifestly SOLELY for revenue generation; there is no practical good effect on the street level. The costs imposed far exceed even the revenue generated.

There ARE Luddites and Malthusians in the Collective, and they DO have power.